There’s a different kind of pressure retailers feel now.
Fear of a retail ice age has subsided; Amazon is big but not so bad, and streamlining, cost-cutting and bankruptcies continue, though not on the scale of recent years.
It’s now about picking up the pace of innovation and what technologies to bet on; personalization; creating “frictionless” and relevant shopping experiences through collaborations and new services, and planning for potential recession and a consumer spending slowdown, all of which were major themes permeating the NRF 2019 Retail’s Big Show this week at the Jacob K. Javits Convention Center in New York.
The NRF show, considered among the three largest retail conferences in the world, with more than 37,000 attendees, 500 speakers and 200 sessions, was as crowded as ever. The program was weighted more heavily toward sessions spotlighting women in leadership positions, the #MeToo movement, inclusiveness and taking on social causes, but when corporate consciousness didn’t top the agenda, speakers repeatedly underscored what they see as ongoing viability in brick-and-mortar stores despite the rise of the Internet, mobile shopping and changing consumer behavior.
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“Rumors of our demise are greatly exaggerated,” said Chris Baldwin, NRF chairman and chairman, president and chief executive officer of BJ’s Wholesale Club, paraphrasing Mark Twain. “We’re more healthy, vibrant, innovative and exciting than ever.”
Baldwin opened up the convention by paying tribute to the late Blake Nordstrom as “a great friend to many of us and a visionary leader” and calling for a moment of silence.
Singling out retailers he views as most innovative, Baldwin cited Target Corp. for its “next-generation” store design, investment in its team and in exclusive brands; Kidbox for using data science to target families with the right products and donating clothing to children in need; Tractor Supply for simultaneously operating 1,700 stores and having a “robust digital presence,” and Macy’s Inc. for its “epic events,” reimagining retail, and putting Blue Mercury on a path of “exponential growth.”
Baldwin said among the major retailers in the U.S., there were 2,000 new store openings last year, belying the popular notion that America’s store base is shrinking. “Over 90 percent of the shopping is still done in stores,” Baldwin said. And while 90 percent of consumers under 35 used smartphones or tablets to make shopping decisions over Thanksgiving weekend, that drove traffic to stores, he said.
Target ceo Brian Cornell called the retailer’s 5.7 percent surge in holiday same-store sales “proof that consumers still want to shop at great stores. It’s been a long, long time since anyone said holiday sales were driven by physical stores. It’s because all of us have made changes and investments and enhancements to bring consumers back to stores. We spent a lot of time looking at market share, category by category. The consumer voted with their wallet.”
The retailer has aggressively retooled its 1,800 stores “to make them work even harder,” Cornell said. “They’re fulfillment hubs and incredible showrooms for inspiration. During the holidays, three out of every four digital orders were fulfilled by a store.” And reining in apparel, beauty, technology and home has given sales associates expertise in their areas. “They’re driving the sales and engagement,” he said.
Warby Parker launched selling eyeglasses online, but the buzzy brand, which donates an eyeglass to someone needy for every one sold, quickly evolved, adding physical stores and eye exams. “We go back to the customers to understand what would be the best experience for them,” said Neil Blumenthal, cofounder and co-ceo, during a panel on disruptive retail. “[Consumer] needs continue to evolve over time.” When the company launched in 2010, desktop and laptops ruled the day. “Now it’s all about mobile.”
“All of us probably feel like we’re in a constant state of transformation,” said Nicholas Goad, partner and managing director of Boston Consulting Group. “Fortunately, constant state of transformation is essential to survive for most companies and most industries — especially retail.”
ECONOMIC OUTLOOK
“2019 is all about recession watch,” said KPMG chief economist Constance Hunter, who believes there’s a 50 percent chance the world’s largest economy could tumble into recession this year after 2018’s strong performance, possibly in the second half, Hunter said, during an economic roundtable.
TS Lombard chief U.S. economist Steven Blitz said it could be the “first U.S. recession that is actually made in China as opposed to in the United States.” He said if there isn’t a recession this year, then it will be more likely to come in 2021 than in 2020.
Jack Kleinhenz, NRF’s chief economist, was the least pessimistic, stating there’s a 15 to 20 percent chance of recession this year, although he stressed there is much uncertainty. “We are now in a situation that’s very complicated,” he said, citing weaker global growth, trade tensions and interest rates. “But I want to emphasis that the economy is not falling apart.”
Janet Yellen, former chairman of the Federal Reserve, reassured retailers that while economic worries abound, the “fundamentals underlying consumer spending look excellent.…We had over 200,000 jobs a month created last year. Wages are growing, not by leaps and bounds, but around 3 percent and that’s gradually inching up so personal income is rising.”
She also pointed to tax cuts and lower gasoline prices fueling consumer spending, though while the global economy “fired on all cylinders in 2018, it now looks like we’ve got less-strong and less-synchronized global growth.”
China appears to be slowing, European economies are mixed and carry “downside risk,” Yellen said, with many on edge over trade tensions and interest rates. “The markets are focused on the downside risk now,” she said. With that, “we are seeing a tightening of financial conditions.” If the government shutdown and dysfunction in Washington continues, “it could impact consumer psychology and consumer sentiment,” said Yellen.
INNOVATION
With innovation, where are retailers placing their bets? According to a report presented by Sucharita Kodali, vice president, principal analyst, Forrester Research, the hottest areas of investment are data security, personalization, mobility and cross-channel operations. Retailers are “lukewarm” on investing in digital stores, artificial intelligence and distributed selling, and “cool” to robotics, augmented reality and virtual reality. Little interest there.
“Shoppers are distrustful of personalization,” said Kodali. There’s “tension” between companies knowing too much and gathering the data relevant to customers’ needs. With their mobile devices, consumers are into scanning prices and accessing product information and reviews; store locators are less important, though information obtained through mobile devices lead to better store experiences and is “a reason why the retail apocalypse didn’t happen.”
Kodali said 2019 will be a “big year of collision courses,” pitting Amazon against Walmart, with Walmart winning in groceries, Amazon gaining ground internationally; brands pulling back from marketplaces such as Amazon due to mounting concerns over pricing, counterfeits and image, and personalization versus privacy. “Privacy laws are coming,” predicted Kodali.
At Ralph Lauren, there will be a renewed focus on consumers as individuals, improved social media experiences inspired by active brands, and efforts to better connect physical stores to the online business, said Janet Sherlock, chief information officer. She sees sales associates getting better equipped with data to provide better service in the stores, beacon technology being on the roadmap, and continuing to use technology to monitor passersby and gauge their interest in the window merchandising.
Home Depot has a store in Atlanta, where the company is based, with 90 unique pilots, said Albert Vita, director of in-store experience and visual merchandising. Among the traps to avoid when innovating, as Vita sees it, creating more friction in the shopping journey, not predetermining what success looks like, and not having the right infrastructure, such as WiFi, to support innovations.
“We are all experiencing new technology emerging every day,” said Jeff Gennette, Macy’s chairman and ceo, during a session on reimagining the customer journey. “Every retailer has to be maniacally focused on their customer.”
Macy’s is advancing technologies. For example, in its furniture departments, Marxent Labs, a 3-D product visualization platform for furniture and kitchen cabinet retailers, is orchestrating “the biggest virtual reality rollout in retail history,” involving 60 stores, according to Beck Besecker, Marxent ceo and cofounder. The experience involves putting on goggles to get “immersive” 3-D tours of rooms simulating how rooms at home look when furniture pieces are added. When customers use the technology, the average order is up 50 to 60 percent, said Besecker. “Are we giving [consumers] an experience they can’t get on their couches? The story behind something is important — a sense of discovery.”
Part of the mission of b8ta, a tech company and retailer of sophisticated electronic products that has a shop at Macy’s Herald Square, is to make the physical store as “measurable and manageable as an e-commerce site to drive real change and to think outside traditional store metrics, such as sales per square foot. The company uses sensors and cameras to measure impressions, how often customers touch products or receive product demos,” said Vibhu Norby, ceo and cofounder of b8ta.
“Collaboration is the new competition. That’s a quote from someone but I don’t know who said it,” said Rachel Shechtman, brand experience officer at Macy’s and founder of Story, a small store on the west side of Manhattan where the merchandising theme changes every three to eight weeks. Last year, Macy’s bought Story, reflecting a desire to bring different experiences to the selling floor.
“The challenge for retailers is how to put the customer at the center of decision-making,” said Greg Petro, ceo of First Insight and moderator of a session on the product paradigm shift: consumer-centric merchandising in the age of data and decision agility. Petro predicted that customer-centricity goes mainstream this year.
At a session highlighting some of the best technology-integrated stores in New York, Jeff Halverson, Ulta vice president of store operations and new store development, said “associates have a dashboard on an iPad that ties into all of our data. They can text ‘help me’ for ideas about how to engage with a customer. We sell 25,000 products, so we have to get data quickly into associates’ hands.” Work Jam, a crowdsourced scheduling tool, ties into social networks for associates, while Mia proprietary software ensures inventory is available. Halverson said Ulta acquired some augmented and virtual reality technology enabling stores to demonstrate how makeup looks.
Shaye C. Anderson, director of program management and customer experience at Nordstrom Inc., said the retailer is taking more of a view to online and local market strategies. At Nordstrom’s Men’s Store, which opened in Manhattan in April, the shopping experience bridges the gap between in-store and online, Anderson said, adding that the location offers access 24-7 to buy-online, pick-up-in-store parcels. “We adjusted to meet the demands of the local customer,” she said. “We also deliver in three hours or less to some zip codes. You can shop online and reserve items in the store without committing to a purchase. Also, we improved returns with an express self-serve kiosk in the store.”
RETHINKING TALENT
Retailers are trying to loosen Amazon’s grip on digital shopping by plowing money into their online businesses and looking outside of the usual hiring pool and into the tech world. According to LinkedIn data, the most popular and fastest-growing job in retail is the software developer.
“Often people don’t see a career in retail if they’re in a tech job or have a technical background. So how do we actually speak about our purpose and mission and how do we show the impact of what they can do,” said Karalyn Smith, senior vice president of human resources at Sephora, during a panel on how retail is reimagining talent.
Anthony Marino, president of ThredUp, an online consignment and thrift retailer, said companies need to “put people in a safe place. We need to convince people that if they make mistakes, they won’t get fired.”
Carrie Ask, brand president of Men’s Wearhouse, said since retail is moving so quickly, companies need to “look across the silos” and bring teams from throughout the organization together in an environment where they can come up with insights quickly. When that happens, she said, you’ll “see sparks fly — that’s the environment you want to create.” That collaborative spirit also helps people feel like they’re not taking a risk alone.
Walmart is a case in point. Jeremy King, Walmart Inc.’s global e-commerce business as chief technology officer, two years ago was promoted to executive vice president, helping the Bentonville, Ark.-based giant operate its physical units and e-commerce site with a single view. “We grew the tech team by 1,700 people,” King said. “We have 7,500 in my organization, Walmart Labs, and we’re going to add 2,000 on the retail side. As customers change how they shop, they want a digital experience. We’ll see the transition of the automation of processes.”
HOW FASHION RETAILERS CAN USE DATA
Karen Harvey, ceo of Karen Harvey Consumer Group, said in fashion, it’s historically been “art first and data second.” Today, the two need to work hand-in-hand.
Jessica Murphy, cofounder of True Fit, helps customers “decode personal style, fit and size.” At first, brands were reluctant to provide specifics on their specs, saying that was proprietary information, but today, True Fit offers merchandise from 1,700 brands.
Meaghan Rose, founder and ceo of Rocksbox, an online subscription service for jewelry, asks customers to create a wish list and then personal stylists build monthly boxes where pieces can be borrowed, swapped or purchased.
Aaron Sanandres, ceo of Untuckit, which sell shirts tapered to look good not tucked in, started as an online brand and expanded with stores around the country. It was a “robust analysis” of data that drove decisions on where to open brick-and-mortar locations, he said. “We can predict with some directional certainty where we’ll do well when we open a store.”
He said Untuckit wasn’t deterred by the so-called “retail apocalypse,” and knew that customers would embrace the stores. But making that leap from online to in-person requires a different skill set. “There’s a level of anonymity in stores that customers really like. We want to be inviting, but not off-putting.”
In-store and online, in an age of privacy concerns, “You have to strike a balance between not creeping people out and providing a good experience — and that’s a delicate balance,” said Murphy.
PURCHASES THAT STAND FOR SOMETHING
Patagonia has been a socially conscious company for 45 years, but the stakes are higher than ever in a polluted world. The company last year shortened its long-standing mission statement from: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis” to “We’re in business to save our planet.”
“Our original mission statement was developed in the Nineties and at the time was pretty groundbreaking,” said Rose Marcario, president and ceo. But what’s happening to the climate and the planet today is no longer a forecast, it’s real, she said, and the new mission statement is intended to help get the message out that Patagonia is going to be “more proactive” in the future.
Patagonia in November announced that thanks to corporate tax cuts, it would donate $10 million to nonprofit environmental groups while continuing to help protect public lands and support voter participation. “We’ve been funding activism for three decades,” she said, noting that the company has donated $100 million to grass-roots organizations since it was founded.
Investing in saving the planet is good for business, Marcario said. “This last decade has been our best in terms of business.”
Michael G. Rubin, founder and executive chairman of Fanatics, a retailer of licensed sports merchandise, sees the value to selling on Amazon and Alibaba. “We have an incredible assortment of merchandise. It’s more than one million sku’s of licensed sports product,” said Rubin. “The strategy for us is to take that assortment and syndicate it exclusively to specific marketplaces.”
Going forward Fanatics wants to continue to make deals with teams and is heavily invested in marketing. Rubin said the company spent $100 million last year on advertising.
GIRL POWER
With girl power a big part of the NRF programming, there was a venue called the Girls Lounge on the third floor of the Javits Center, that featured a session on “the power of the pack: women alone can be powerful but together have tremendous impact,” among other sessions.
Rebecca Minkoff, cofounder and creative director of her eponymous fashion brand, said when she entered the working world, “it was isolating at first. You have to step out of your comfort zone and find allies. Now I’m in a female-founded company. I said, ‘We need more guys.’ Diversity is leveraging the power of difference.”
Andy Dunn, founder of Bonobos and senior vice president of digital native brands at Walmart, said he wrote an article for International Women’s Day last year about his grandmother, who was a child bride and married at 12. When he showed the story to his wife, she got angry and accused him of being a poster child for male privilege. “Why don’t you write about all the times you’ve gotten it wrong in our relationship,” he recalled her saying. He got on it, and has documented 17 examples.
Statistics on women’s advances in the workplace are pretty disappointing, said Diane Dietz, president and ceo of Rodan + Fields, pointing to data for women in the c-suite: 6 percent in 2017; 5 percent in 2018. “How do you best serve consumers if you’re not representing half of the population,” she said. “White men — spend one day this year at a diversity conference or LGBT conference. It’s important. Too many of these conversations about women are between women.”
On women and inclusiveness, the retail industry has “the most diverse workforce of any sector,” said Lars Petersson, president of Ikea U.S., which he said gets more customers and sales for retailers, he added. “We have diversity and inclusion ambassadors in every store.”
Ulta chief information officer Diane Randolph said 60 percent of the officers in the company and 92 percent of the associates are women. “Women being nurturers by nature introduces a culture and a value system and our associates feel that,” said Randolph during a session on the power of female-led organizations. But she cautioned, “It is important to bring a balanced perspective of thought and important to correct the balance,” and invite men into the conversation.